Pound Sterling to Dollar Outlook: GBP Eyes 1.36 after Weak US Data

Published: Sunday, 16 August 2026 23:54 BST - Written by David Woodsmith

STORY LINK Pound Sterling to Dollar Outlook: GBP Eyes 1.36 after Weak US Data

The Pound to Dollar (GBP/USD) exchange rate was trading close to 1.3540 at the start of the new week after Sterling reached its strongest level in around three months on Friday.

GBP/USD touched 1.3560 before a limited correction, with the 1.3550 area remaining an important near-term resistance zone.

Low currency-market volatility and demand for higher-yielding currencies have continued to provide underlying support for the Pound, while softer US inflation and activity data have reduced expectations for another Federal Reserve interest-rate increase in September.

Sterling also gained some support from last week's UK GDP figures, which showed that the economy expanded by 0.4% during the second quarter and grew a stronger-than-expected 0.3% in June.

According to UoB; “Upward momentum is starting to slow, and a breach of 1.3460 would indicate that GBP has entered a range-trading phase.”

GBP/USD has so far remained comfortably above this support area, maintaining the potential for another challenge of recent highs.

US producer prices were unchanged in July compared with consensus forecasts for a 0.2% increase.

The annual headline PPI rate slowed to 4.7% from 5.5%.

A narrower measure of core producer inflation, excluding food, energy and trade services, increased 0.4% on the month and 4.7% over the year.

The benign producer-price figures reinforced the message from the previous day's consumer inflation data that price pressures are not currently accelerating sufficiently to force an immediate Federal Reserve response.

MUFG commented on the US inflation backdrop; “Overall, the report supports our view that the Fed is likely to leave rates on hold in September.”

It added; “However, it is unlikely that the US rate market will scale back rate hike expectations much further in the near-term given a hike still can’t be ruled out.”

The Dollar came under further pressure on Friday after US retail sales unexpectedly declined 0.6% in July, compared with forecasts for a 0.1% increase.

The figures strengthened concerns over the outlook for US consumer demand and pushed the market-implied probability of a September Fed hike down towards 30%.

CIBC Capital Markets head of G10 FX strategy Jeremy Stretch had commented; “For now, at least, the CPI print has really given the market good reason to continue to pare back Fed tightening expectations.”

US Dollar Still Has Potential Support

Despite the softer data, markets have not completely ruled out another Federal Reserve rate increase.

Inflation remains above the Fed's target and uncertainty surrounding energy prices continues to complicate the outlook.

ING commented; “There is reluctance to price out further Fed tightening, which is keeping dollar bulls active.”

The bank highlighted hawkish Fed communication and Chair Kevin Warsh's continued emphasis on price stability as factors preventing a more substantial decline in US rate expectations.

ING added; “There is plenty of downside for front-end USD rates and, by extension, the dollar, if we are right to think the Fed won’t hike.”

This leaves the Dollar vulnerable if incoming economic releases provide further evidence that US inflation and activity are losing momentum.

Near-Term GBP/USD Forecast: UK Inflation and Jobs Data Take Centre Stage

For Sterling, attention will switch to a major run of UK economic releases this week.

The latest labour-market figures will be released on Tuesday, followed by July inflation data on Wednesday.

The data will be particularly important after the Bank of England's latest policy meeting revealed a relatively hawkish split, with three policymakers supporting an immediate rate increase.

Evidence of persistent wage growth or stronger inflation would reinforce expectations that UK interest rates will remain elevated and could provide additional support for Sterling.

Conversely, softer wage and inflation readings would reduce the case for further monetary tightening and could encourage profit-taking after the Pound's recent gains.

For GBP/USD, 1.3550–1.3560 remains the immediate resistance area.

A sustained break higher would put the mid-1.36s back in focus, while initial support is located around 1.3500 followed by 1.3460.

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TAGS: Pound Dollar Forecasts